You’ve probably read dozens of articles talking about the importance of customer service in the modern business. Inspirational quotes tell us that we’re all in the customer service department. We know intuitively that customer service is extremely valuable to the company.
How do we translate that gut feeling into cold, hard numbers? Most people need more than intuition to tell them where to spend their customer service dollar to gain the most return on investment.
You can read up on the research, which says that happy customers spend up to 140% more than unhappy ones, but does it really apply to your company? After all, every industry is different. General research won’t help you design the specific customer service program that works best for you.
You’ll have to gather the data to quantify the value of customer service to your company. Don’t just think about the gains you get from good customer service, such as customer retention and good word-of-mouth.
Take into account the costs of poor service, such as high customer churn and a bad reputation, as well.
If you take a systematic and logical approach to your calculations, you’ll be able to map out your customers’ journey with your company and how it relates to your bottom line.
Answer these four questions and you’ll be on your way to measuring the real value of your customer service.
1. What customer behaviors create value for your company?
You can’t measure value until you know exactly what it means to you. Do you gain the most from small, repeat customer purchases, or large, less-frequent ones? Are you looking for an elite group of customers to provide most of the year’s profits? Is your business run on a subscription model? If so, you’d measure value by customer loyalty and how long they stay with your business.
Maybe you gain the most value from customers who cause you the least amount of trouble – the less you spend on serving them the more money you make. Some customers are valuable because they have a lot of contacts and bring in business.
Look at your business model and choose the customer outcomes that add the most value to your company. This will help you decide which metrics you need to track.
2. What do your customers say about you?
For this step you need to gather accurate data on your customers over time (ideally several years, spanning their entire journey with your company). There are several common metrics used to measure customer satisfaction:
- Net promoter score (NPS) – how likely the customer is to recommend you to their friends and family
- Usually measured on a scale of 0 to 10, with 0–6 being considered ‘detractors’, 7–8 ‘passive’, and 9–10 ‘promoters.’
- Customer satisfaction (CSAT) – how happy the customer is with a specific experience with your company (unlike the NPS, which measures their feelings about your company in general).
- Customer effort score (CES) – how easy or difficult it was for the customer to accomplish a task with your company, such as making a purchase or resolving a customer service issue
- Customer churn rate – the number of customers who cancel their service or refuse to make a repeat purchase
You don’t need to stick to these metrics if there are others that make more sense in your business. All that matters is that the stats you track lead to accurate results.
Segment your customers so you know how each group feels. If you gain most of your value from the top 10% of your customers, their satisfaction ratings are the most important and should carry more weight.
3. What actually happened?
This is where you find out why your customers are happy or not. For instance, when the airliner Jetblue gathered their customer satisfaction data, they also tracked the customer’s experience and how that correlated with their rating: How did the customer go about booking their flight? Perhaps their TV was broken? Did one of the flight attendants go out of their way to help with a problem?
In addition to asking the customers how they feel by surveying their NPS, CSAT, and CES, you should also take a look at how you measure the success of your customer service team:
- First response time – time it takes to respond to customer queries
- Average handling time – how long each call takes
- First-call resolution – percentage of customer issues resolved on first contact
- Problem resolution time – how long it takes for each issue
- Number of calls it takes to resolve an issue
How well do those metrics match up with customer satisfaction?
4. What do your customers do over time?
Once you’ve gathered the data, figure out how it connects with your customer’s behavior. For instance, look at your customer surveys and correlate the ‘promoter’ scores with their habits over time. How much do they spend compared to ‘passives’ and ‘detractors’? How much does it cost to serve each segment, over two months or two years? How likely is each type of customer to churn?
Some of the statistics you can track are:
- How often they make a purchase and how much they spend
- Number of customer support calls or tickets
- How many products were returned
- How often they complain on social media
This data analysis will help you see the real effect of your customer service on ROI. You’ll be able to predict how your customer service initiatives will benefit you. This varies depending on the industry. For example, a health insurance company would gain more value from moving a customer a few notches from a ‘detractor’ to a ‘passive’, rather than trying to create more ‘promoters.’ A retail bank would gain more advantage by investing in changing a ‘passive’ to a ‘promoter’, since they gain more from promoters in their industry.
When you know the real value of your customer service investment you’ll be able to design the best strategy that allows your company to adapt to your customers’ changing needs – and that creates the most value of all.